Should I lease on to a carrier or run my own authority?

How do leasing on and running your own authority compare?

The rest of this post explains each row, the rules behind it, and how to compare the two on your own numbers.

What does leasing on actually mean?

Under federal rules, a lease is a contract in which the owner of equipment grants its use, with or without a driver, for a specified period to an authorized carrier, in exchange for compensation (49 CFR 376.2(e)). You own or control the truck. The carrier holds the authority. While the lease runs, the load moves under the carrier's name.

The carrier can only use your truck under a written lease that meets the requirements in 49 CFR 376.12, and it must give you a receipt when it takes possession (49 CFR 376.11). The lease must also say the carrier has exclusive possession, control, and use of the equipment for the duration of the lease, and assumes complete responsibility for its operation (49 CFR 376.12(c)(1)).

That control clause does not decide whether you are an employee or an independent contractor. The same rule says so directly (49 CFR 376.12(c)(4)). Your status is decided by other laws and by how the relationship actually works.

What must a lease spell out?

This is where leasing on is won or lost, so read every line before you sign. Federal rules require the lease to clearly state:

• Pay. The amount the carrier pays for the equipment and your services, on the face of the lease or in an attached addendum, delivered before your first trip. It can be a percentage of gross revenue, a flat rate per mile, a variable rate, or another agreed method (49 CFR 376.12(d)).
• Who pays what. Fuel, fuel taxes, empty miles, permits, tolls, detention and accessorial services, base plates, and licenses (49 CFR 376.12(e)).
• Payment timing. Within 15 days after you submit the necessary delivery documents (49 CFR 376.12(f)).
• Freight bills. If your pay is a percentage of the load, you get a copy of the rated freight bill at or before settlement (49 CFR 376.12(g)).
• Charge-backs. Every item the carrier may pay first and then deduct from your settlement, and how each is computed, with copies of the documents behind them (49 CFR 376.12(h)).
• No forced purchases. You are not required to purchase or rent products, equipment, or services from the carrier as a condition of the lease (49 CFR 376.12(i)).
• Insurance. The carrier's obligation to maintain public liability coverage, who provides any other coverage such as bobtail, and the amount of any insurance charge-back (49 CFR 376.12(j)).
• Escrow. The amount, what it can be used for, an accounting, interest at least quarterly, and return no later than 45 days after the lease ends (49 CFR 376.12(k)).

A lease that leaves any of these vague is a reason to ask questions, or to walk away.

What does running your own authority take?

FMCSA says companies that transport federally regulated commodities owned by others for a fee in interstate commerce need operating authority (the MC number) in addition to a USDOT number. The steps, covered in detail in how to get your own trucking authority:

1. Register with FMCSA and choose your type of authority. FMCSA lists a $300 fee for each type of permanent authority and does not refund mistaken filings.
2. Have your insurer file proof of liability coverage. FMCSA will not grant authority until the minimum is on file. For a for-hire carrier hauling nonhazardous property in a vehicle of 10,001 pounds or more, that is $750,000 (49 CFR 387.9).
3. Have a process agent filed (the BOC-3).
4. Wait for the grant. FMCSA's page says new filings may take 20 to 25 business days, longer under further review. See how long new authority takes.

After that you are a new entrant. For 18 months your roadside performance is monitored, and FMCSA conducts a safety audit, generally at least 3 months in (49 CFR 385.307). Read what happens in the new entrant safety audit. Then come the ongoing filings in our compliance checklist.

On the business side, you find freight, check broker credit, invoice, and wait to be paid. Many new carriers use factoring to close that gap. Read whether a brand-new authority can use factoring.

How does insurance differ between the two?

Leased on. The carrier carries primary liability for the public while you run under its authority. You usually carry what the lease assigns to you. Common examples are bobtail or non-trucking liability for when you are off dispatch, physical damage on your own tractor, and occupational accident for your own injuries. See bobtail vs non-trucking liability and occupational accident vs workers' comp. If the carrier provides any of it and charges it back, the lease must say how much.

Your own authority. You carry primary auto liability, and brokers will usually ask for cargo coverage too. If the truck is financed, the lender will ask for physical damage. See what insurance a new trucking company needs. Your coverage history under someone else's authority does not become your own primary liability history. You start fresh.

How do the numbers compare?

The honest comparison is per mile, not per load. Under a lease, your revenue is your settlement after charge-backs. Under your own authority, it is the full rate, and every cost the carrier used to absorb is now yours.

Run the calculator below twice:

1. Leased on. Enter your miles, fuel, and truck payment. Under "More options," count only the costs the lease leaves with you, and treat charge-backs as costs. Compare the result with what the lease pays per mile.
2. Own authority. Run it again with every cost you would carry: your own insurance, permits, plates, any dispatch or factoring fees, and deadhead you would no longer be paid for. Compare that with the rates you can realistically get for your lanes.

The gap between those two answers is what your own authority has to earn back. If you cannot fill in a number, that is a good sign you need more information before you switch.

Which one fits me?

Leasing on tends to fit when:

• You want to learn the business with less paperwork and less up-front cost.
• You do not have broker relationships yet, or do not want to spend your time booking freight.
• You would rather not carry primary liability and the full compliance load yourself.

Your own authority tends to fit when:

• You can find steady freight at rates that cover your full cost per mile.
• You have cash or financing to carry insurance and wait out payment terms.
• You want control of lanes, customers, and rate decisions, and you accept all of the risk that comes with them.

Some owner-operators start leased on and move to their own authority later, and some go the other way. The model is a decision you can revisit.